Today’s rapidly growing global economy has a thirst for energy that has never before been seen in human history. The world is addicted to fossil fuels but this addiction comes with a cost, climate change. Oil is the world’s drug of choice and since the days of John D. Rockefellar, ExxonMobil has been the world’s drug dealer of choice. Today ExxonMobil produces roughly 3.9 million barrels of oil equivalent a day and 125 million metric tons of greenhouse gas a year. (Exhibit 1) It is the largest publicly traded oil and gas company in the world with a market capitalization of $346B. The link between ExxonMobil and climate change is undeniable, but whose responsibility is it to put a stop to global warming? The drug dealer or the drug user? What responsibility does ExxonMobil have to the world to combat global warming and what responsibility doe ExxonMobil have to its shareholders to simply maximize value?
For years, ExxonMobil has profited off of the world’s growing dependency on fossil fuels with no regard for the impact their energy was having on the environment. They focused on two simple things: 1) The sale of fossil fuel was profitable for shareholders and 2) the dramatic economic growth across the world they were fueling was pulling millions of people out of poverty. For years, it seemed these two simple facts were enough for Exxon, even when ExxonMobil scientists started to suspect that the burning of fossil fuels was having a warming effect on the climate. One might hope Exxon would share this scientific knowledge with the world, but instead millions of dollars were poured into lobbying efforts and more scientific studies to prevent the acceptance of global warming. Why you might ask? Because global warming is a huge fundamental risk to Exxon’s core business. If the world gets serious about stopping global warming and carbon emissions are limited, the demand for ExxonMobil’s product will go down. And with massive investments in oil reserves around the world, a dramatic decrease in demand for oil will crush Exxon’s bottom line.
So what is Exxon’s strategy? Exxon has accepted (in recent years) that global warming is real and is a real threat to the world, but how much responsibility are they willing to take to make a difference? According to Exxon’s website:
Our commitment to positive action on climate change can be broken down into four components:
- engagement on climate change policy and planning;
- mitigating GHG emissions in our operations;
- development of products that help customers and consumers reduce GHG emissions;
- and investing in next-generation clean technologies
This policy seems great at first. If Exxon were truly committed to creating climate change policy that worked, mitigating their emissions, mitigating the world’s dependence on emissions and creating clean tech, than surely this $346B behemoth of company could make a real dent in global warming. But, the devil is really in the details and the allocation of resources between these four components is what will be crucial going forward. I would argue that the money that is currently being spent on policy and planning is poorly utilized lobbying dollars that are really creating policies which enable the world’s dependence on fossil fuel, rather than forcing significant change. Exxon’s allocation of resources at this time suggests they are focused on capturing short term gains, while very slowly figuring out how to mitigate the risk of climate change to their own business and the world in the long run.
What is needed is a more significant investment in research and development. Components 3 and 4 of Exxon’s strategy, developing clean technologies and developing products that reduce consumer emissions, are what will have the largest impact on global emissions. Developing nations are addicted to growth, and no developing nation is going to prioritize carbon emissions over improving the lives of its population, so Exxon must take a larger role in developing alternative technologies. Exxon has fueled growth across the world for years, but for them to maintain this position they have to start fueling more innovation. Because global warming is a big enough issue that if they don’t figure out how to solve it, another corporation will and their investments in fossil fuels will be ruined. ExxonMobil must make short-term sacrifices to promote innovation that will lead to a sustainable long-term future for both the company and the world’s ecosystem. So the question is will ExxonMobil put its money where its mouth is? ExxonMobil understands the challenges and has outlined a strong plan… but will they make the financial sacrifices needed to transform their business?
 CNN Money – http://money.cnn.com/quote/profile/profile.html?symb=XOM
 The Guardian “Tell the Truth ExxonMobil: A low carbon future is affordable and necessary” – https://www.theguardian.com/business/2016/jan/31/exxon-mobil-climate-change-oil-gas-carbon-footprint-paris-climate-talks
 ExxonMobil “Climate Policy” – http://corporate.exxonmobil.com/en/current-issues/climate-policy/climate-perspectives/engagement-to-address-climate-change